Building and construction materials company Sephaku Holdings expects its earnings a share for the financial year ended March 31 to be between 7.67c and 9.37c and its headline earnings a share to be between 6.72c and 8.41c.

This compares with earnings a share and headline a share of 21.08c reported for the 2019 financial year.

The company attributed the lower earnings to low demand for building materials.

"The concrete sector performance is closely linked to the highly cyclical construction industry. By March, South Africa had experienced over 70 months of a downturn in the business cycle, the longest on record. This prevailing trading environment resulted in intense competition, with subsidiary Métier Mixed Concrete experiencing high competition in both the Gauteng and KwaZulu-Natal markets," it points out.

The mixed concrete pricing competition continued to intensify.

The inflationary price increases in raw materials combined with the product mix exerted additional downward pressure on profitability resulting in the net profit after tax declining to R7.7-million from R20.3-million. The performance during the second half of the year is normally negatively impacted by the builders’ holiday in December and January which was exacerbated by the abrupt cessation of operations during the last week of March owing to the Covid-19 lockdown.

To support profit margins, Métier engaged its suppliers to negotiate lower price increases, completed the fleet optimisation programme and reduced its employee headcount.

Reflecting on subsidiary Dangote Cement South Africa's (SepCem's) performance, the company said cement demand was largely constrained, with a decline observed in the rural consumer markets during the year under review.

"In the first six months of the year to June 30, 2019, SepCem’s sales volumes were 19% lower than the comparative period the year before. Sales volumes were impacted on by an increase in imported cement and competition from blenders. SepCem introduced a competitively priced brand called Falcon Cement to compete against the imported cement in KwaZulu-Natal and lower strength class cements in selected inland markets.

However, SepCem’s second half of 2019 improved markedly with sales volumes increasing by 20% compared to the first half of 2019 and marginally higher than the same period in 2018.

SepCem’s full-year 2019 volumes were 9% lower than 2018, an improvement from the 19% decrease recorded for the interim period.